While the details are still emerging, this is clearly a significant market move by Brady and one that greatly strengthens their postion in energy CTRM.  We’ll be speaking with Gavin Lavelle, CEO of Brady later in the day and will bring additional details as they become available.

Patrick Reames, Managing Director

Service providers and system integrators are a vital part of the CTRM landscape, providing unique skills or supplementing resources for companies that are working to improve their CTRM system capabilities. In fact, a recent CommodityPoint study, Consultants and Systems Integrators in Trading and Risk Management, notes that about 80% of the companies utilizing commercial CTRM systems have employed the services of one or more of these consulting organizations.

The companies that provide these services around CTRM software can be generally described as one of four types of providers:

1. Global well-known firms (including what is known as “The Big 4″) for which E/CTRM is but a component of their overall business
2. Relatively large firms that employ one hundred or more consultants and specialize in few markets, such as E/CTRM and Financials
3. Firms who service a local market only, employing a few dozen or less consultants and who specialize in a particular industry (in this case E/CTRM)
4. Boutique specialist firms, who employ few consultants, but have specific capabilities in some aspect of E/CTRM, such as risk management.

Additionally, not all of the larger Service Provider firms have capabilities (practices) around CTRM software in all geographies or locations, or they may focus in on particular aspects of Trading & Risk Management such as business consulting, strategy consulting or software selection.

capSpire, founded in early 2009 and with clients in the US and Europe, is blazing a bit of a different trail in this industry. While they had been essentially a boutique consulting firm, they have recently begun pursuing a growth strategy that leverages their deep domain knowledge around specific CTRM solutions, such as Solarc’s RightAngle product, and coupling those skills with leading edge technical resources in order to create an organization that is capable of providing unique solutions to difficult business issues. As Lance Laubach, capSpires CEO notes, “We’re always looking ways to improve our value proposition to our customers and differentiate ourselves from the competition. You can’t do that by merely providing an hour’s effort for an hour’s wage – you have to look for ways to utilize technology as a lever with which to create multiples of return for that hour’s effort.”

Having seen solid success with this model, the company has been filling their growing staffing need through the recruitment of highly experienced industry veterans and new university graduates that possess unique technical skills. The combination of resources enables capSpire to:

• Deliver expert level consulting support for industry standard CTRM applications
• Mentor and train new resources in the company’s methodologies
• Create high value, blended teams capable of consulting around industry specific issues, yet also able to deliver leading edge technical solutions at a cost below the industry average.

As Jeff Hardcastle, capSpire co-founder puts it, “We invest considerable time and resources in the area of recruiting and employee development. We have a very strict discipline on the skillsets we recruit and have grown very effective at identifying those traits, especially in college hires. All of our new hires, including those from the universities, undergo a comprehensive three month program of education in our methodologies, the CTRM market as a whole, and our unique technical “toolbox” that we’ve developed around our CTRM practice that allows us to provide holistic “engineering quality” solutions that contrast stereotypical consulting methodologies.”

The “toolbox” that Mr. Hardcastle references is being leveraged as the company has also been purposefully evolving from a “pure” consulting business to one that is more of a full service CTRM company – that is an organization that provides both services and products that support, but are essentially agnostic, to the underlying CTRM product(s). capSpire has taken a few of the technical solutions within that “toolbox” and are evolving those into products that can create significant value and accelerate the delivery of solutions to complex business issues.

Their first such product offering, Gravitate, is a CTRM “portal” and is currently in use by wholesale petroleum marketers, providing a valued added service to their customers. This newly delivered product enables a marketer’s customers to access their information contained within the marketer’s CTRM system, such as prices, trade performance, and invoices. The system, via the use of its own data structures, is independent of the underlying CTRM software, yet has been designed to easily integrate with all leading products, providing a highly configurable platform for web-enabling those products.

According to Mike Scharf, the other capSpire co-founder, “We recognize traditional consulting is all about reinventing the wheel on each project. Our approach is recognition that for most clients, they don’t need a new wheel; they need a services partner who can quickly provide them with the solutions they need coupled with the reassurance of an “always available” partnership. The Gravitate CTRM Portal is just another example of our own innovation and investment in creating solutions that don’t require our clients to reinvent the wheel.”

capSpire has been able to create a bit of a unique animal in this market. Their deep domain knowledge and roster of talented people and specialized technical solutions has enabled them to grow quickly and has provided a solid base of referential customers. Their challenge will be in maintaining what for some has proven a difficult balance between growing rapidly and maintaining a consistently high quality of service on the consulting side. capSpire’s recruiting and training model, combined with their ability to leverage proprietary technical solutions would seem to position them well for meeting that challenge.

Despite the relatively low profile, the company, headquartered in Fort Wayne Indiana, has built an impressive roster of clients and has added additional capabilities to their product family through both internal development and acquisition.  In fact, in 2011 iRely acquired Comtech, a Houston based ERP and financial systems company.  The acquisition provided not only additional technology and product capabilities, but also expanded iRely’s global footprint with a support center in the Philippines.

As Mr. Shah noted during our conversation yesterday, 2011 saw significant growth for the company with a number of notable successes.  In terms of new sales, iRely signed 30 new customers, including trading companies, ag and grain producers and co-ops, and petroleum distributors and c-stores.  A few of the key customers signed in the year include Jack Daniels Distillery, Federated Cooperative, Hi-Line Cooperative and Crystal Flash Energy.

With the growth in customer counts, the company is continuing to add new resources and as of the end of 2011, iRely’s global headcount has exceeded 200.

Given the increasing scale of the company and their growing footprint in the market, iRely’s days of being the quite company appear to be numbered.

According to their press release of January 16th, the company saw a 70% year-over-year growth in revenues in 2011, including increases in recurring revenue (revenues from support & maintenance, license “rentals”, etc)  of 145%, which represents about 52% of their total 2011 revenues.  Recurring revenues in 2010 were only 36% of total revenues.  They noted that they had secured 14 “substantial” new license sales in 2011, versus 10 in 2010.

Brady indicates that after a final accounting, they expect to report EBITDA growth of around 70%, which is in-line with the market’s forecast for the company.  Additionally, Brady highlighted the fact that they have more than £10 million on hand (more than $16 million) with no outstanding debt.  This could be very significant as the company continues to seek out potential acquisition targets.  As you might remember, Brady had acquired Viz Risk Management in late 2010.

When the company’s final results for 2011 are announced in early March, we anticipate their revenue numbers will continue to show that they are well positioned in the ranks of the top CTRM vendors.  In fact, with the recent acquisition of Solarc by OpenLink, we now rank Brady as the fifth largest CTRM solution provider in the world based upon total revenue.  Additionally, based upon their reported growth numbers, we believe that they are certainly keeping pace with, and in some cases exceeding, their peer group.

All in all, very impressive results that speak well for Brady and also provide a good indicator that the market for CTRM solutions in Europe continues to be robust.

So, we would really appreciate hearing your opinions about, and experiences with, the various products and vendors that support energy and commodity trading activities around the globe.  The short electronic survey won’t take you long to complete and the final report will be freely available for you to check how your views match up with others.

To begin taking our survey, please click on the following link:

www.utilipoint.com/2/2011_CTRM_VPS_TY.

We do ask that you enter your name and contact details to help us validate your response. All replies are confidential.

Note: Responses from persons employed by, or associated with E/CTRM software vendors will NOT be considered.

Note: Please excuse the somewhat variable audio as we are still ironing some technical bugs in our production process.

Part 1

Part 2

Several years ago, as some of you many remember, a company called YellowJacket made progress in transforming IM into a somewhat effective trading environment, though only for weather derivatives.  Despite the limited reach of their platform, it was enough to catch the attention of ICE, who subsequently bought up the technology, preventing its expansion into the energy commodity space and potentially limiting any loss of liquidity from their exchange should YellowJacket have been successful at expanding their functional footprint and transforming their product into a one-to-many deal making (and deal capture) application.

Since that time, there have others who have carried on with the concept, though none have yet brought forth a commercial product for capturing any part of the IM trading conversation…until now.  Allegro just announced that they are releasing what they call Trade Connect 8.1, which they describe as “…(a) component (that) automates the import of intraday pricing, simplifies and translates instant message (IM) trade commitments, and helps your trading organization better leverage market and trading information. Trade Connect transforms unstructured instant message trading chats into structured OTC market and trade data. It also enables brokers’ intraday bid/offer price quotes to be used in analyzing current market trends against a trader’s current portfolio. As instant messages are received, the Allegro system reads those messages, parses the data into readable elements, and records the information on the Allegro system’s intraday price board. In addition to the data received via instant messaging, all incoming data from external price feeds are recorded in the Allegro price value table.”

Interesting stuff.  Allegro has partnered with a company called Pivot Inc. and is leveraging their Pivot 360 technology platform that was developed for the financial markets.  Though the initial development for Trade Connect is clearly pointed toward capturing and communicating IM trade and price data across a trading floor (a valuable capability to be sure), the technology and the business potential that’s involved in fully leveraging the energy trading markets’ use of IM could combine to bring to forth some very compelling capabilities in the near future.

This is certainly a product that is worth watching…and we will.

Paragon signed their biggest customer to date, one of North America’s largest pipelines in early 2011, and the company has been live on the product for a couple of months now.  After a relatively quick implementation, this new customer has proven to be an enthusiastic supporter to Paragon as a reference site (even though their lawyers don’t want their name broadcast), a very valuable asset to a young growing company such as Paragon and a key to landing new business and being able to grow a customer base.  In fact, it was the success of this project that lead directly to their other very large win this year, one with a “large southeastern utility” which is currently in the midst of implementation.

Kevin indicates they have also been selected by another US utility and are in final contract negotiations on that deal.  Overall, he indicates that they are seeing increased market interest and are experiencing a significant jump in the number of RFP’s that they are working on as compared to the previous two years.

All in all, Paragon has proven successful in growing their credit risk business from a start up about three years ago to now having several blue chip, and a number of smaller, customers today.   Their challenge, as noted by Kevin, is to grow the company’s capability and staff in order to meet demands of the market place and service their growing roster of clients.

In terms of new sales in the last couple of months, their most notable wins, among several, have been for their Aligne Pipeline Operations product for a North American based gas distribution company and Aligne for Trading and Risk Management, including a significant deal with a large European power utility.

Ms. Anderson also discussed SunGard’s success in moving their customers ahead from the legacy SunGard products such as Zainet, Aces, GTM, etc. onto the new Aligne platform.  At latest count, she indicates the company has converted, is currently converting, or has received commitments from more than 50% of their legacy customers to move onto the Aligne platform, with several more commitments anticipated by the end of the year.

Looks like the company continues to make solid progress with their Aligne strategy.

It certainly looks like a pretty good deal for Triple Point.  For a price of around $25 million (assuming close to 100% of QMASTOR’s stock was purchased), the company will add somewhere in the neighborhood of $15 million in revenues in FY2011 and significantly expand Triple Point’s presence in the Australian market, which accounts for 82% of QMASTOR’s revenues.  On the product side, QMASTOR’s solutions appear to fit well with Triple Point’s growing focus on total value chain management, that is tracking commodities (and transactions) from production to consumption.

You can read the press release here.